Payment Plan Agreement Template
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Writing a payment plan is critical even if you are simply loaning money to someone close whom you trust. The payment plan is a contract that will legally bind each party to perform everything the plan requires them to.
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Using a Payment Plan Agreement Template
Using an agreement will provide security for the lender, and predictability for both parties so each will know their duties over the duration of the agreement, so you won’t be stuck asking the borrower for money continuously. Having an agreement in place could also decrease the possibility that one party will breach an obligation, which could prevent a falling out between friends, not to mention a costly court showdown.
Although payment plans will vary depending on the nature of the transaction (e.g., educational loan, vehicle loan, personal loan, etc.), most payment plans should contain the following information:
- Names and personal contact information of the lender and borrower
- Total amount that the borrower must pay
- Dates that payment begins and ends
- Dates when payments must be made
- Methods of payment (e.g., check, electronic withdrawal, etc.)
- Collateral information (Will property be used as security for the loan?)
- Conditions or obligations that are particular to the plan
- Date of the agreement
Another important element to consider is interest. If you are lending money with an interest rate, you’ll want to note what the rate is and when interest payments are due.
Payment Schedule
Creating an actual schedule to include in the plan can make adhering to the agreement easier. To create a schedule, the lender and borrower should consult a calendar and agree to dates when particular sums of money will become due. Then list these dates, the amounts of money due, and a system to record whether payments were made in full on that date, or whether they were not made or were partially made.
Finally, both parties must sign the agreement to show their consent to it. In addition, you may want to include sections that cover potential penalties for nonpayment or other violations, or conditions under which the parties could terminate the agreement.
Below is a rough outline of a payment plan that could be used for simple loans. You should consult an attorney regarding loans for large amounts of money.
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